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New Post 8/14/2009 2:01 AM
User is offline rudyard
3 posts
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Recharge Model 


I'm looking to develop a charging model for a contact centre (i.e. a corporate charge to services who use the corporate contact centre).  This could be a charge by call which I am thinking is likely to include overhead and staffing costs etc.  Services using the contact centre will have different call durations and different volumes of calls.

I just wondered if anyone has any ideas/experience of implementing a similar recharge model and if so how was it calculated?  I am currently thinking that for each service I will need to do the following:

(staffing costs + overhead costs)/staff minutes = cost per minute

then for each service...

average call duration x number of calls= number of minutes


number of minutes x cost per minute = service recharge

Does this look like a sensible model?!




New Post 8/14/2009 8:23 AM
User is offline Adrian M.
764 posts
3rd Level Poster

Re: Recharge Model 

It looks like you have a good baseline for your model.  Now you need to begin to think about exceptions.


1. Your formula should probably not assume 100% utilization at all times since then you risk being too busy and not being able to handle calls.  So I would make the formula assume that your staff is only busy 80% of the time and see how many calls you can handle with that.  Then adjust your chargeback per call price to cover 100% of the costs with only 80% of the calls (or some other desired %).

2. The client might ask - what happens when you're too busy and you can't answer my calls?  So you need to put a "warranty" of sorts which says that if we don't answer your call within X amount of time, the clients gets back money or gets credit, etc.

3. You might also consider a hybrid model.  Aka - for a flat fee of Y dollars the client can get Z number of calls (from zero to Z calls it's monthly flat fee) and then you can charge extra for any calls above that.

Hope this helps!

- Adrian

Adrian Marchis
Business Analyst Community Blog - Post your thoughts!
New Post 9/8/2009 12:46 PM
User is offline Nathan Caswell
6 posts
10th Level Poster

Re: Recharge Model 


General Observations:

I'm assuming both customer and provider are internal, i.e. the 'charge' is based on an internal transfer pricing scheme and that services using the contact center in fact hold their own P&L, so that their the charge backs will have a measurable impact. If this is a new scheme, expect howls and gnashing of teeth from the P&L owners as it comes straight from their current bottom line.

As a general rule, internal transfer pricing is notoriously difficult to get right because there is no market. Cost centers without external competition have a tendency to focus on their internal concerns. If they are a corporate resource total capacity and utilization represent corporate resource allocation decisions that don't map well to the price mechanism.

To the point:

If you are well down stream of such considerations, the most sucessful chargeback operations start by providing a built in price advantage over external sources (from corporate contribution) and treat organizational users as they would external customers by competing on quality. That means creating a service agreement with each organizational user covering capacity, call SLA's, and setup and change management.

In the case of a call center the important factors are total capacity, number and mix of customers to average capacity fluctuations, cost of setup and change management for call responses scripts, and cost of management and reporting setup. Specialized training for some subset of the total capacity provides an extra setup and maintenance cost, and extra capacity type to consider. What customers are probably looking for is a stable cost, SLA's up to some defined peak capacity.

Since the customer set is limited, the key cost driver  for the call center is the total capacity. Under or over capacity is a risk the call center isn't in a position ot manage. Using

(staffing costs + overhead costs)/staff minutes = cost per minute

assumes that the call center sets the capacity. This leaves the customers over charged (per minute) and the center underfunded if they have too much staff. Even worse if under staffed because the callers will not be serviced.

The best option is transfering the risk to the customer in the form of a price per capacity. If the customer load is well characterized as to time per call, capacity measured by calls/period may be suitable. This is, however, another risk that the customer should be in the best position to mitigate (through their customer management, script design, etc) so a capacity measured by FTE might be best. This is a fairly common strategy that allows each customer access to the entire current excess capacity, with 'fair share' limits only when the total capacity is exceeded.

Setup, change and consulting services can be split out. The draw here is to pull the experts into the center and then share them "at cost". It is a net win for the customer to eliminate 1 FTE then pay  0.2 FTE of higher skill for the 0.1 FTE of work needed. Either fixed price per job or resource per hour or day can be used depending on the standardization of the particular service.

It's worth noting that that this scheme fits well into the usual enterprise planning cycle where each organization would make it's claim on corporate resources such as call capacity and adjusting overall budgets and capacities to meet the corporate and organization needs and goals. The accounting is just done differently.

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